Correlation Between GX AI and Phillips

Can any of the company-specific risk be diversified away by investing in both GX AI and Phillips at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GX AI and Phillips into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GX AI TECH and Phillips 66, you can compare the effects of market volatilities on GX AI and Phillips and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GX AI with a short position of Phillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of GX AI and Phillips.

Diversification Opportunities for GX AI and Phillips

0.12

Correlation Coefficient

GX AI  Phillips

Average diversification

The 3 months correlation between BAIQ39 and Phillips is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding GX AI TECH and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 and GX AI is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on GX AI TECH are associated (or correlated) with Phillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips 66 has no effect on the direction of GX AI i.e., GX AI and Phillips go up and down completely randomly.

Pair Corralation between GX AI and Phillips

Assuming the 90 days trading horizon GX AI TECH is expected to generate 0.56 times more return on investment than Phillips. However, GX AI TECH is 1.8 times less risky than Phillips. It trades about 0.13 of its potential returns per unit of risk. Phillips 66 is currently generating about 0.04 per unit of risk. If you would invest  4,745  in GX AI TECH on October 4, 2024 and sell it today you would earn a total of  3,307  from holding GX AI TECH or generate 69.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	86.63%
Values	Daily Returns

GX AI TECH  vs.  Phillips 66

GX AI TECH

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GX AI TECH are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, GX AI sustained solid returns over the last few months and may actually be approaching a breakup point.

Phillips 66

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phillips 66 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with GX AI and Phillips

The main advantage of trading using opposite GX AI and Phillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GX AI position performs unexpectedly, Phillips can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Phillips will offset losses from the drop in Phillips' long position.

The idea behind GX AI TECH and Phillips 66 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Volatility Analysis module to get historical volatility and risk analysis based on latest market data.